Bidding on uBid heats up

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Shares of uBID opened at 40 and sank as low as 34 1/8 before starting to rise again. With more than 9.1 million shares trading -- more than five times the number of shares offered in the deal -- the stock closed at 48.

Observers said the initial sell-off was likely the work of institutional investors that got allocations in the IPO and flipped their shares once the stock started trading.

"My suspicion is that a lot of those institutional investors got small allocations because this is a very small offering, and they have been conditioned to sell as soon as possible," said Steven Tuen, research director at IPO Value Monitor. "Right now, it's the retail investors driving this stock up."

Lead underwriter Merrill Lynch priced the uBID IPO at the top end of the estimated $14-to-$15 range. That had already been increased from the initial $12-to-$14 range.

Back-door access

Direct marketer Creative Computers sold about 17 percent of its uBID subsidiary to the public in the offering and plans to distribute its remaining stake in the company (about 7.3 million shares) to its own shareholders in 1999.

Creative's connection to the IPO has been a boon for the company's stock, which has risen from less than 9 in early November to as high as 63.

When the distribution is made, Creative shareholders will get about 0.7 shares of uBID (uBID)
UBID
for each share of Creative they own, assuming that there isn't an increase in the number of Creative shares outstanding.

Creative Computers shares tumbled more than 25 percent, weakening as soon as uBID opened for trading. Shares of Creative dropped 9 to 26 1/4, with 8.2 million shares changing hands.

"When people try to get in an IPO through the back end, this usually is what happens. The parent company falls [when the IPO occurs], since people's expectations tend to get ahead of themselves," said Ryan Jacob, portfolio manager of The Internet Fund.

Jacob pointed to USA Network's sell-off Thursday after the debut of Ticketmaster Online CitySearch as an example of this phenomenon. See related story.

Tough business

UBID still relies a great deal on close-out or refurbished computer-related products, many of which it gets from Creative Computers. But it has begun to expand into new product categories, such as consumer electronics and home appliances. The company said in its prospectus that it plans to expand its product line further, a strategy competitor Onsale has also followed.

Onsale (ONSL)
onsl
now auctions off sporting goods, office equipment and travel vacations. Onsale generated losses of $13.2 million on sales of $181.8 million in the last 12 months, while uBID has recorded losses of about $3 million on sales of $24.1 million in the first nine months of 1998.

UBID was launched in April 1997 but only started generating significant revenue in the first quarter of this year.

"It's very competitive, there are slim margins, and a lot of promotional dollars will have to be spent to build the site to scale," said Jacob, who attended the company's roadshow presentation in New York on Thursday. "It's not terribly attractive."

Other new issues

For the first time in several months, the IPO market experienced a pair of small, nontechnology deals with debuts from air-bed manufacturer Select Comfort and upscale restaurateur P.F. Chang's China Bistro.

Select Comfort (AIRB)
AIRB
closed its first day of trading at an 18 percent premium to a $17 offering price, which came in at the high end of the expected range. Hambrecht & Quist is the lead underwriter for the 4 million-share deal. It's the first deal H&Q has managed since the summer.

P.F. Chang's China Bistro (PFCB)
PFCB
also had quite a debut, jumping more than 54 percent after the Chinese restaurant chain sold 4.15 million shares at $12, near the top end of the estimated range. Earlier this week, lead underwriter Donaldson, Lufkin & Jenrette upped the size of the deal from 3.45 million shares.

Vignette comes back

Internet software developer Vignette, which pulled its original IPO registration statement only six weeks ago, has come back to test the new-issue market again. The company, touted as the hottest private company in a recent issue of the Red Herring, a tech business magazine, filed with the Securities and Exchange Commission to raise as much as $30 million in a deal headed by Morgan Stanley Dean Witter.

Finally, Ticketmaster Online CitySearch (TMCS)
tmcs
rose 7 percent in its second day of trading. Shares, which priced at 14 and opened at 52 on Thursday, rose 2 13/16 to 43 1/16.

The stock of major Ticketmaster Online stockholder USA Networks (USAI)
USAI, +1.10%
, however, continued to lose ground, falling 1 1/2 to 29 1/8. Though shares of Barry Diller's broadcast company have gained about 50 percent since the IPO's announcement in late September, they have fallen about 14 percent in the past two days. USA has a 42.5 million-share stake in the newly public Ticketmaster Online CitySearch.

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